How US healthcare reform could change pharma

Healthcare reform has made change in the pharma sector all the more urgent. Is the industry right to take a wait-and-see approach? Andrew Tolve investigates.

Healthcare reform has made change in the pharma sector all the more urgent. Is the industry right to take a wait-and-see approach? Andrew Tolve investigates.

In the days following the passage of healthcare reform in the United States, the Internet lit up with recommendations for how pharmaceutical companies should take immediate action.

Pharma firms should overhaul sales models to target payers and formulary gatekeepers rather than prescribing doctors.

They should prepare for increased compliance controls and ramp up direct-to-consumer marketing to target the estimated 32 million Americans about to enter the health system.

A few months later, little seems to have happened.

Most pharmaceutical companies have adopted a wait-and-see mentality, or are starting some small pilots, says Charlotte Sibley, senior vice president, business management at Shire Pharmaceuticals.

This industry has always been better at reacting than getting out in front of challenges proactively.

The pharma industrys reluctance to act immediately makes sense.

Most major provisions of reform wont take effect until 2014, and many nuances of the law are still being ironed out.

But healthcare reform is certain to compound the challenges the pharma industry already faces.

If dwindling physician access, the need for a stronger value proposition, and decreasing investment in innovation were hotbed issues a year ago, theyre all the more so today.

Weve been inching closer and closer to that burning platform, Sibley says.

Healthcare reform makes change all the more urgent.

(To hear Sibleys views on the importance of listening to payers, employers and other stakeholders, see A new vision for sales force effectiveness.)

Unlocking physician access

Physicians now see more patients in less time while handling an increasing administrative burden.

As a result, sales reps often cant secure the time they need to sell their products.

Now imagine adding 30 or 40 million new patients to that equation, says Mark Gleason, senior vice president of corporate development at Aptilon.

He points to the state of Massachusetts, where, since adopting universal healthcare, the average wait time for patients making appointments has soared from three weeks to two months.

Many primary care physicians have fled the state or their practices due to the increased workload.

You can imagine trying to deliver high-quality medical services when you have to crank through a patient every eight minutes or so, says Gleason.

Its a very frustrating work environment.

In this setting, the old pharma sales model of reps knocking on office doors has proven even more futile, which serves as a cautionary tale for what the entire country will look like once healthcare reform is enacted.

One solution, Gleason believes, is to reach out to physicians through alternative channels, especially online.

Online channels

Aptilon has developed a recruiting channel called ReachNet that posts links to product content throughout medical publisher sites and forums with large pools of registered physicians.

Once physicians engage with the content, they can call a rep and get follow-up service on the spot.

We need to make it as convenient as possible for physicians to get information they need on demand on an absolutely personalized basis, Gleason says.

(For more on online channels, see Can the Web replace the rep?.)

Gleason says a second solution is to reach out to nurse practitioners and physician assistants who, at least in Massachusetts, are regularly called into front-line service to help manage the increased patient load.

So-called docs in a boximmediate care doctors offices located in big box chains like Walgreens, CVS, and Wal-Marthave cropped up around Massachusetts, using nurse practitioners and physician assistants to maintain service levels and handle high volumes.

They definitely need resources on-demand because theyre just not as well trained, Gleason says.

Additionally, many of these docs in a box are institutional settings that restrict rep access by policyone more reason why pursuing alternative channels to unlock physician access is essential, Gleason says.

Value matters

Twenty years ago, the market for pharmaceuticals was relatively open, and value propositions didnt matter nearly as much as science and sales.

Today, its a different story.

Numerous brands and generics fight for market share in every therapy area, and the customer landscape is shifting from prescribers interested in medical solutions to payers driven by cost and differentiation.

Healthcare reform will accelerate this evolution, says Shires Sibley.

Payersand insurance companies in particularwill want to see comprehensive value propositions that back up all claims of clinical efficacy and cost effectiveness with rigorous data and peer-reviewed articles.

We need to make our case, Sibley says.

Its not just about safety and efficacy. It also has to be about value and outcomes.

Sibley believes healthcare reform will make payers increasingly receptive to good value propositions.

Cutting medical costs

Hospital bills are insurance companies single largest expense, and one thats bound to increase with universal coverage.

Pharmaceutical companies can position their drugs as short-term expenses to negate larger long-term bills.

Sibley points to Geisinger, which has begun giving primary care doctors more financial aid and nursing assistance to help avoid high medical bills down the road.

In 2008, the company experienced an 18 percent drop in hospital admissions, which led to a 7 percent decrease in overall medical expenses.

Other insurers like WellPoint, Aetna, and Cigna have begun to experiment with similar programs.

Cigna found that having a nurse check in with a diabetes patient twice a week to make sure he was filling prescriptions and taking medicine saved an estimated $500,000 to $1 million in future hospital costs.

I think this can be a wakeup call for the industry, says Sibley.

Drugs keep people out of hospitals, get people back to work, and relieve pain and suffering, and payers respond to that.

So do patients. The battle to pass healthcare reform often cast the pharmaceutical industry in a negative light.

Lost in that conversation (or yelling match) was all the good that drugs can do.

We dont emphasize enough the personal impact that drugs make, Sibley says.

The fact is, drugs improve lives. That certainly should be a part of a comprehensive value proposition.

Harness the chatter

People talk about everything online today, including pharmaceuticals and disease management.

Doctors participate in physician forums and medical publisher sites, while patients connect on blogs, Twitter, Facebook, and advocacy group sites.

(For more on the role of advocacy groups, see How patient advocacy groups can boost patient compliance.)

Pharmaceutical companies have been conspicuously absent from the conversation, partly due to lack of FDA regulation governing fair balance and adverse event reporting in online forums, and partly because the pharma industry is risk-averse and slow to adopt change.

The long and vitriolic battle over healthcare reform, which has elevated online chatter to a roar, wont change that in the short term.

Because its such a polarizing topic, pharmaceutical companies are very reluctant to engage online, says Jim Dayton, emerging media director at Intouch Solutions, a pharma marketing agency whose clients include Sanofi-Aventis.

Social media is such an immediate space, they dont want to open up a can of worms.

Credible, two-way channels

In the long term, however, Dayton believes the healthcare reform debate will intensify the pressure on pharma companies to develop online presences.

Polarized debates and runaway chatter emphasizes the need to create credible, two-way channels of communication between companies and patients.

For instance, one can imagine a pharma company creating an unbranded website that hosts a series of talks by key opinion leaders, scientists, doctors, and pharma execs to spread factual information and respond to concerns about reform.

Theoretically, thats a great idea, says Dayton.

And if this were ten years from now, it would be a different story, maybe even five years.

Once the FDA publishes its findings on social media (which likely will include new social media guidelines), it will be pharma companies responsibility to create established channels and spokespeople within those channels.

Healthcare reform and other burning issues are going to accelerate this process, says Dayton.

It will help bring about change across the industry, where we use these channels to better communicate with patients, with the public in general, with key opinion leaders, and healthcare providers.

(For more on online pharma channels, see Marketing and social media: A success story.)

Threats to innovation

The rising cost of R&D during the past 10 years combined with a slowing pipeline has caused pharma companies to become more risk-averse with innovation, which in turn has hurt medical advancement.

Theres such an element of serendipity in drug discovery, says Sibley.

You may be looking for a drug for cancer and you come up with a drug for obesity.

Healthcare reform includes a provision for comparative effectiveness that many in the industry believe will further stifle innovation.

The fear is that if it becomes so costly and time-consuming to do clinical trials for comparative effectiveness, companies will look at molecules and say, The risk isnt worth it, the time is too long, and the chance of success too small, Sibley says.

(For more on comparative effectiveness, see Health data and comparative effectiveness.)

She believes that, rather than back away from innovation altogether, pharma companies must take measured risks.

That could mean a model of investing in many small companies (some will fail, some will succeed, and some will be acquired) more licensing co-development agreements, or more in-house or outsourced R&D.

Companies need to explore these different options and choose which fits best with their strategy, vision, and risk tolerance, says Sibley.

Rick Anderson, managing director of healthcare venture capital firm PTV Sciences, agrees that reform will threaten innovationbut in a specific way concerning medical devices.

Big, transformational technologies will continue to be well funded, he says, but incremental technologysmall, incremental changes created by entrepreneurs or physiciansmay experience a dramatic pullback in investment.

Hospitals are going to be under tremendous pressure with the Medicare cuts from this legislation, as well as the number of patients that theyre going to have to take care of over time, he said in a video interview with McKinsey Quarterly.

Therefore theyre going to have to sort out what theyre going to pay for.

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